Recognizing the upside of more potential hotel deals within reach over the past year, The Georgetown Co., a leading developer and owner of commercial, retail and mixed-use properties nationwide, has launched a US$1 billion acquisition platform and took a significant position in hotel developer and management company First Hospitality to seize what it perceives as a great opportunity.
Georgetown’s new Managing Director and Head of Hospitality Michael Fishbin said the firm already has two deals under contract, expects to announce one or two more before the end of 2021, and will be looking to deploy the platform over the next several years, working with First Hospitality CEO David Duncan and its chairman Stephen Schwartz, to acquire portfolios and single assets. Fishbin, who has served as an advisor on more than US$30 billion of hospitality transactions over the course of his career, including a dozen years leading EY’s hospitality practice, said the team has been underwriting as many as five deals a week and the sweet spot seems to be single assets in the US$30-100 million price range.
Georgetown, founded in 1978 by Marshall Rose and today led by Adam Flatto with about US$3.5 billion in asset value, is already developing a Four Seasons residence in Washington, D.C., adjacent to the hotel (and separate from the new platform), and has an ownership position in four hotels at the prolific Easton mixed-use development in Columbus, Ohio.
Fishbin said Georgetown likes new urban markets, which include college towns and good work-play environments, and they believe those opportunities will be more present in the near term. They prefer seven-day-a-week markets with multiple demand generators and wouldn’t look at seasonal markets. “But the challenge will be finding deals that you can underwrite to the IRR hurdles within a three- to four-year window,” he added.
Property size will likely range between 200 and 350 rooms – more compact full-service properties, as well as luxury and upper-upscale. Fishbin said that Georgetown likes independents and soft brands, and they will also look at premium-branded select-service opportunities. “We’re building one (select-service) and will probably announce a second soon – an extended-stay hotel in suburban Atlanta.”
A significant portion of the new US$1 billion platform is the Georgetown investors and family offices that it works with. Fishbin said there will be situations where they will “go big,” and in those instances would team with some of the larger private equity groups focused on hospitality. In fact, it did make a failed portfolio bid with another capital partner this past summer.
“We have the flexibility to go small, medium or large, working either with the Georgetown capital or some of the larger PE firms also focused on hospitality,” Fishbin added.
The new platform will also consider new development, but only very selectively, Fishbin said, and the main focus will be on acquisitions.
Cultural fit
The deal with First Hospitality, which has about 55 hotels under management and equity interests in about half of those projects, came about because of like-minded, bullish viewpoints about the industry, according to Fishbin, and the need to align with a strong manager that could strengthen Georgetown’s skill set as it ramped up for growth. After looking at about 10 management companies, First Hospitality rose to the top because of the culture that Schwartz built and Duncan’s charge to invest mightily in terms of the people, the processes and the technology of the company. A handshake deal was done in early 2021 and since then the two companies have been working to identify acquisition opportunities, underwrite, close, onboard and operate. “We’ve been very focused on aligning our teams and actively looking to grow our businesses,” Fishbin said.
Important for First Hospitality was the opportunity to continue to lead its organization day-to-day. It will also continue to source third-party opportunities. “We love their culture. So, they very much are at the leadership on the day-to-day of the management,” Fishbin said, adding that the deal provides flexibility for Georgetown to look at opportunities where another management company might be a better fit.
“Georgetown is a group that punches above their weight,” Fishbin closed. “It’s never about them; it’s about the projects… They’re kind of financial wizards, and they’ve been really successful for their investors, many who go back to when Marshall Rose started the company, and that speaks a lot.”